Learn How to Classify Stocks January 27th, 2010 If you are a beginner in the stock market it is easy to think that all stocks are pretty much the same. But in fact there are different kinds of stocks available, and learning how to classify them will help you to choose the right ones to buy. You can classify stocks in many different ways depending on the information you want to get out of them. For example if you have a particular need or desire to invest in a certain area of the market, you would want to classify stocks according to what area they operate in. So you could put all the gold mining companies in one category and all the medical companies in another category, and so on. This classifies the stocks in a way that will put all the relevant ones in together – regardless of the company size. You could also classify them according to the size of the actual company who has made the shares available. This is done by finding out what the stock price is and how many shares are available, and multiplying one by the other. You can then work out what value of company you want to invest in and see whether the shortlist of companies you have available meets your specifications. This way of classifying stocks usually results in companies being classified as either small, mid or large cap companies. The ‘cap’ stands for capitalization, and this is worked out by doing the multiplication given above. People do differ in their interpretation of what makes small, mid and large cap companies however, so don’t regard them as being set in stone. Another way of finding suitable stocks and classifying them is to use an index. One of the most famous indexes of all is the Dow Jones index, although in fact this is slightly misleading. The Dow Jones normally refers to the Industrial Average index; Dow Jones as a company actually provides several indexes for people to use. The most important thing to consider is that there is no right or wrong way of classifying stocks. Instead you must choose the way that feels right for you. Some people will invest in any kind of company provided it shows a healthy appetite for success. Other people will only invest in a particular type of company, so you can see that the issue of classifying stocks will vary from person to person. Next, check out The Dean's penny stock picks that have made huge gains.